Motilal Oswal Financial Services Ltd:Annual Report 2023-24 Analysis

Motilal Oswal Financial Services Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Motilal Oswal Financial Services Ltd. (MOFSL) was founded in 1987 by Motilal Oswal and Raamdeo Agrawal.

Headquarters Location and Global Presence #

The company’s headquarters are located in Mumbai, India. MOFSL also has a presence in various cities across India and a limited international presence through its subsidiaries and branches.

Company Vision and Mission #

• Vision: To be a respected and trusted financial services provider, enriching lives through knowledge and financial success.
• Mission: To empower investors with research-based advice and provide a comprehensive suite of financial products and services, delivered with integrity and transparency.

Key Milestones in their Growth Journey #

• 1987: Founded as a sub-brokerage house.
• 1990s: Expanded into equity research and institutional broking.
• 2006: Launched PMS (Portfolio Management Services).
• 2007: IPO and listing on the stock exchanges.
• 2010s: Diversified into areas like housing finance, private equity, and wealth management.
• Present: Continues to expand its product offerings, technology, and geographic reach.

Stock Exchange Listing Details and Market Capitalization #

MOFSL is listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). (Ticker symbol required)

Recent Financial Performance Highlights #

(Data from latest annual or quarterly report required)

Management Team and Leadership Structure #

• Motilal Oswal: Chairman and Whole-Time Director
• Raamdeo Agrawal: Chairman - Motilal Oswal Asset Management Company Ltd.
• Key Leadership: The company has a well-defined organizational structure with experienced professionals heading various business verticals like broking, wealth management, asset management, and housing finance.

Notable Awards or Recognitions #

(Awards or recognitions from reputable industry sources required)

Their Products #

Complete Product Portfolio with Categories #

MOFSL offers a diversified range of financial products and services, broadly categorized as follows:

• Retail Broking & Distribution: Equity trading, commodity trading, currency trading, distribution of mutual funds, IPOs, and insurance products.
• Institutional Equities: Research and execution services for institutional investors.
• Wealth Management: Investment advisory, portfolio management services (PMS), and financial planning for high-net-worth individuals.
• Asset Management: Management of mutual funds and alternative investment funds (AIFs).
• Private Equity: Investing in growth-stage companies.
• Home Finance: Housing loans.
• **Investment Banking: **Capital raising, M&A, and other advisory services

Flagship or Signature Product Lines #

• Research-Based Broking: Emphasizes providing clients with in-depth research reports and investment recommendations.
• PMS (Portfolio Management Services): Tailored investment strategies for high-net-worth individuals.

Key Technological Innovations #

(Description of the Company’s technological advancements)

Quality Certifications and Standards #

(Descriptions of Company’s Quality Certifications, ex. ISO etc.)

Recent Product Launches or R&D Initiatives #

(Information on the Company’s recent product introductions or R&D advancements)

Primary Customers #

Target Industries and Sectors #

MOFSL caters to a wide range of clients across various sectors, including:

• Retail Investors: Individuals investing in the stock market, mutual funds, and other financial products.
• Institutional Investors: Mutual funds, insurance companies, pension funds, and foreign portfolio investors.
• High-Net-Worth Individuals (HNIs): Wealth management services are tailored to the specific needs of HNIs.

Geographic Markets (Domestic vs. International) #

The primary focus of MOFSL is the Indian domestic market. While they have a limited international presence, their core business is within India.

Major Client Segments #

• Retail Investors: A significant portion of their revenue comes from retail broking and distribution.
• Institutional Clients: Institutional equities and investment banking services cater to this segment.
• HNIs: Wealth management and PMS are targeted towards high-net-worth individuals.

Distribution Network and Sales Channels #

MOFSL utilizes a multi-channel distribution network:

• Branch Network: A wide network of branches across India.
• Online Trading Platform: A digital platform for trading and investment.
• Authorized Persons/Franchisees: A network of authorized persons who act as intermediaries.
• Relationship Managers: Providing personalized service to wealth management clients.

Major Competitors #

Direct Competitors in India and Globally #

• Indian Competitors: ICICI Securities, HDFC Securities, Kotak Securities, Angel One, Zerodha, Groww, Upstox.
• Global Competitors: (Less relevant as MOFSL’s international presence is limited) Large global investment banks and brokerage firms operating in the Indian market.

Competitive Advantages and Disadvantages #

• Advantages:
  • Strong brand reputation built on research-driven advice.
  • Diversified product portfolio.
  • Extensive branch network.
  • Experienced management team.
• Disadvantages:
  • Exposure to market volatility.
  • Competition from discount brokers.

How they differentiate from competitors #

MOFSL differentiates itself through its focus on research-based advice, a strong brand reputation, and a diversified product portfolio.

Future Outlook #

Expansion Plans or Growth Strategy #

(Company’s plans for expansion or growth)

Upcoming Products or Innovations #

(Future product or service innovations)

Sustainability Initiatives or ESG Commitments #

(Company’s sustainability initiatives)

Industry Trends Affecting their Business #

• Increasing Financial Literacy: Growing awareness of financial products and investment opportunities.
• Digitalization: Increasing adoption of online trading platforms and digital financial services.
• Regulatory Changes: Changes in regulations governing the financial services industry.
• Market Volatility: Economic and political events can impact market sentiment and investment activity.

Long-Term Vision and Strategic Goals #

MOFSL’s long-term vision is to be a leading financial services provider in India, recognized for its integrity, research expertise, and commitment to client success. Their strategic goals likely include expanding their market share, enhancing their digital capabilities, and diversifying their product offerings.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Total Revenue: Increased consistently, with a 70% YoY growth in FY 2023-24, reaching ₹7,13,052 Lakhs.
• Profit Before Tax (PBT): Grew significantly in FY 2023-24 to ₹3,03,188 Lakhs, up from ₹1,24,225 Lakhs in FY 2022-23.
• Profit After Tax (PAT): Increased to ₹2,44,562 Lakhs in FY 2023-24 from ₹93,282 Lakhs in the previous year.
• Net Worth: Stood at ₹873,177 Lakhs as of March 31, 2024.
• Return on Equity (ROE): Consolidated ROE was robust at 35% in FY2023-24.
• Earnings Per Share (EPS): Basic EPS increased to ₹164.63 in FY 2023-24 from ₹62.89 in FY 2022-23.
• Debt to Equity Ratio: Stood at 1.6x in FY 2023-24

Business Segment Performance #

• Capital Markets: Income grew by 37% YoY to ₹3,235 Crore. The client base expanded to 42 Lakhs with a 20% YoY growth.
• Asset & Private Wealth Management: Asset Management income increased by 25% YoY to ₹784 Crore. Total AUM reached ₹71,810 Crore, with a 57% YoY growth. Private Equity income stood at ₹217 Crore, up 18% YoY. Wealth Management AUM recorded a 72% YoY growth, reaching ₹1,23,989 Crore.
• Housing Finance: Gross income increased by 11% YoY to ₹589 Crore. The loan book grew by 6% YoY to ₹4,048 Crore. PAT for the housing finance business was ₹132 Crore.
• Treasury Investments: Total quoted equity investments stood at ₹4,206 Crore, with total investments (including alternate investments) at ₹6,113 Crore as of March 2024.

Major Strategic Initiatives and Their Progress #

• Technological Advancements: Upgraded trading platforms, implemented digital solutions (e.g., RISE Super App), and enhanced user experience with advanced analytical tools.
• Product Diversification: Launched new mutual funds and AIFs to cater to various risk appetites and investment goals.
• Distribution Capabilities: Focused on engaging more external distribution partners, with a plan for a 3x growth.
• Regulatory Compliance and Risk Management: Strengthened compliance and risk management frameworks.
• Research and analysis: The research team was expanded and now covers reports on emerging sectors and investment themes.

Risk Landscape Changes #

• Enterprise Risk Management (ERM): The Company has implemented a robust ERM framework.
• Cyber Security: Invested in IT and cybersecurity and has a separate Cybersecurity Committee.
• Risk Management Committee: Is authorized to monitor and review risk assessment, mitigation, and risk management plans.

ESG Initiatives and Metrics #

• Environmental Commitment: The Company focuses on reducing, recycling, replacing, and reusing materials. Specific initiatives include the use of energy-efficient systems, electronic communication to reduce paper waste, and waste recycling programs.
• Social Commitment: Focused on diversity, equity, and inclusion (DEI). Employee well-being initiatives include health camps, paid parental leave, and team-building activities. Extensive learning and development programs were offered, providing over 1.24 million hours of soft skill training.
• Governance Commitment: Maintained a diverse Board of Directors, robust supervisory board, and risk management practices. The Company implemented various policies including a Corporate Social Responsibility (CSR) Policy, a Vigil Mechanism/Whistleblower Policy, and an Equal Opportunity Policy.
• ESG Reporting: The Company publishes an online ESG profile and adheres to the Business Responsibility & Sustainability Reporting (BRSR) framework.

Management Outlook #

• The Company has an optimistic outlook, building on strong performance across various business segments. Focus areas include:
  • Capital Market Business: Continues to deliver exceptional results and maintain a strong market position.
  • Asset and Wealth Management: Scaling up the business, enhancing Ultra High Net Worth Individual (UHNI) offerings, and advisory capabilities.
  • Housing Finance: Plans to bolster the sales force and enhance productivity to drive growth in disbursements and AUM.
  • Strategic Objectives: Committed to sustained growth and excellence across all operations.

Detailed Analysis #

Financial Position Analysis of Motilal Oswal Financial Services Limited #

Three-Year Comparative Analysis (Consolidated) #

Assets #

Liabilities #

Equity #

Significant Changes in Major Line Items (>10% YoY) #

• Cash and Cash Equivalents: Increased by 105.15% YoY, indicating improved liquidity.
• Bank Balances (Other): Increased by 8.39%
• Trade Receivables: Increased by 86.34% YoY, indicating the company has more outstanding client funds, that will likely be collected in the coming year.
• Loans: Increased by 53.06% YoY, driven primarily by growth in the loan book, especially margin trading facilities.
• Investments: Increased by 35.80% YoY, reflecting strategic capital allocation in assets.
• Property, Plant, and Equipment: Increased by 33.49% YoY, indicating investment in fixed assets.
• Debt Securities Increased by 22.18%
• Borrowing(Other than debt securities) Increased by 58%
• Deposits Increased by 2362.94%, though the base value is low.
• Other non-finacial liabilities Increased by 95.48%
• Other Equity: Increased by 39.74% YoY, reflecting retained earnings and other reserves.

Working Capital Trends #

The increase in trade receivables and loans indicates a higher volume of business activity, and increase in current assets suggests a stronger ability to meet short-term obligations.

Asset Quality Metrics #

The provided data does not include specific non-performing asset (NPA) figures for the consolidated entity. The GNPA and NNPA for the housing finance business were 0.9% and 0.4% respectively for FY 2023-24.

Debt Structure and Maturity Profile #

• Debt Securities: ₹ 8,51,052 lakhs as of March 31, 2024.
• Borrowing(Other than debt securities) 5,23,509 Detailed maturity schedules and interest rates for specific debt instruments are provided, indicating a mix of short-term and long-term debt.

Off-Balance Sheet Items #

• Guarantees/Securities Given: ₹ 2,80,003 lakhs, primarily for meeting margin requirements and security deposits.
• Contingent Liabilities (Income Tax): ₹ 3,424 lakhs, related to disputed tax demands.
• Claims against company : 646 lakhs

Motilal Oswal Financial Services Limited: Financial Analysis FY23-24 #

Revenue Breakdown by Segment #

• Capital Market Segment: FY23-24 revenue was ₹3,70,583 Lakhs, a 40.48% growth from FY22-23 (₹2,63,772 Lakhs).
• Asset & Wealth Management: FY23-24 revenue was ₹2,08,539 Lakhs, a 46.13% increase from FY22-23 (₹1,42,740 Lakhs).
• Housing Finance: FY23-24 revenue totaled ₹58,907 Lakhs, an 10.93% increase from FY22-23 (₹53,193 Lakhs).
• Treasury Investments: FY23-24 revenue was ₹1,43,721 Lakhs.

Geographical Segmentation #

The Group operates primarily within India.

Cost Structure Analysis #

• Employee Benefits Expense: Increased by 32.59% year-over-year, reaching ₹1,32,981 Lakhs in FY23-24.
• Finance Costs: Rose significantly by 68.79% to ₹1,01,414 Lakhs in FY23-24.
• Fees and Commission Expense: FY23-24 saw an increase of 32% reaching ₹1,13,784 Lakhs.
• Other Expenses: Increased by 23.72% year-over-year, reaching ₹48,029 Lakhs in FY23-24.

Margin Analysis #

• Gross Profit: A calculation of gross margin is not feasible as the nature of business does not involve cost of goods sold.
• Operating Profit: The operating profit before tax grew by 144%, reaching ₹3,03,188 Lakhs for FY 2023-24.
• Net Profit Margin: The net profit after tax for FY23-24 stood at ₹2,44,562 Lakhs, showing significant increase by 162% year-over-year

Operating Leverage #

Total expenses (before interest, depreciation, and taxation) increased by 30.5%. This indicates that while the revenue of the company saw a healthy growth, the expenses also increased, but at a slower rate, which reflects a positive operating leverage.

EPS Analysis #

• Basic EPS: Increased to ₹164.63 in FY23-24 from ₹62.89 in FY22-23.
• Diluted EPS: Increased to ₹162.91 in FY23-24 from ₹62.66 in FY22-23.

Financial Analysis of Motilal Oswal Financial Services Limited #

Profitability Ratios (3-Year Trends) #

Note: Historical data of 3 years has not been provided, so details are shown only for the last 2 FYs.

Consolidated Return on Equity (ROE) #

• FY24: 35%
• FY23: 15.4%

Analysis: ROE significantly improved, driven by strong growth across segments and improved profitability in Asset Management.

Consolidated Return on Assets (ROA) - MOHFL #

• FY24: 3.2%

Analysis: The Home Finance business shows a stable, but modest, ROA.

Consolidated Net Profit Margin (PAT Margin) #

• FY24: 42.78%
• FY23: 29.59%

Analysis: Operating margins showed good performance, although cost factors show an increase but relatively less than the increase in PAT.

Liquidity Metrics #

Note: The consolidated balance sheet does not directly provide current assets and liabilities in a way that allows for a precise current ratio calculation. This is typical for financial services companies, which have different balance sheet structures.

Efficiency Ratios #

Note: Traditional asset/inventory/receivables turnover ratios are less relevant for financial services. The following analysis is specific to the Housing Finance Segment (MOHFL).

Housing Finance Segment (MOHFL) - Asset Turnover Ratio #

• FY24: 13% (₹589 Cr / ₹4552 Cr)
• FY23: 12.39%

Analysis: Asset utilisation showed little improvement in the housing finance segment.

Leverage Metrics #

Consolidated Debt-to-Equity Ratio #

• FY24: 1.6x
• FY23: Data Not Directly Provided

Analysis: The leverage ratio is given in the reports as ‘Net Leverage’, signifying conservative leverage and support from parent.

Comparison with Industry Averages & Significant Deviations #

• Profitability: Motilal Oswal’s profitability (especially ROE) appears very strong in FY24, likely exceeding industry averages for diversified financial services.
• Leverage: The debt-to-equity ratio indicates use of leverage for growth, which is common in financial services, but should be compared with peer firms to assess relative risk.
• Efficiency: The nature of the business makes standard efficiency metrics less relevant. The focus will be on the cost-to-income ratio.

Key Highlights #

• The company added 6,21,000 clients in the year under review.
• GNPA and NNPA in the housing segment are 0.9% and 0.4%, respectively.
• 32% of the asset under management is in the Alternate Assets (PMS and AIF) category.
• The company’s physical presence is present in 98% of India’s pin codes.

Disclaimer: This analysis is based solely on the excerpts provided. A complete analysis would require the full financial statements and notes, as well as specific industry data for comparison.

Motilal Oswal Financial Services Limited Segment Performance Analysis #

Revenue and Profitability Metrics #

• Capital Markets (Broking + IB): FY24 income was ₹3,235 crore, up 37% YoY.
• Asset Management: FY24 income increased by 25% YoY to ₹784 crore.
• Private Equity: FY24 income was ₹217 crore, up 18% YoY.
• Wealth Management: FY24 income was ₹772 crore, up 41% YoY.
• Housing Finance: FY24 gross income was ₹589 crore, up 11% YoY. FY24 PAT was ₹132 crore.
• Consolidated: Total income grew by 70% to 713,052 Lakhs in FY 2023-2024 vs FY2022-2023.

Market Share and Competitive Position #

• Capital Markets: The company held market shares of 8.2% in Cash and 8.7% in the F&O Premium segments.
• Institutional Business: MOFSL ranked in top positions for:
  • Execution, Corporate Access and Analyst for Thematic Strategy, Banks, Small/Mid-Caps, Transportation & Logistics at Asia Money Brokers Poll 2023.
  • #1 in the Corporate Access Team and Execution Team, and #2 in the Domestic Brokerage for Sale & Best Brokerage Transformation category in the Asia Money Poll 2023.
• Asset & Private Wealth Management: MOAMC has one of the highest shares of Alternate assets (PMS and AIF) at 32% among AMCs.

Key Products/Services Performance #

• Capital Markets: DP AUM reached ₹ 1.46 Lakh Crore. Financial product distribution AUM grew 35% YoY to ₹ 23,720 crore.
• Asset Management: Total AUM (Mutual Funds, PMS, AIFs) was ₹ 71,810 crore, up 57% YoY. Mutual Fund AUM grew 65% YoY to ₹ 48,842 crore. Alternates AUM was ₹ 22,970 crore.
• Private Equity: Fee-earning AUM of ₹ 10,050 crore across growth capital and real estate funds.
• Private Wealth Management: AUM reached ₹ 1,23,989 crore, up 72% YoY. Record net sales of ₹ 5,800 crore, up 8% YoY.
• Housing Finance: Loan book grew 6% YoY to ₹ 4,048 crore. Disbursements exceeded ₹ 1,000 crore.
• Treasury Investment: Quoted Equity investment stood at ₹4,206 crore as of March 2024. Including alternative investments, it stood at ₹6,113 crore, with since-inception XIRR of 18.3%.

Geographic Distribution and Market Penetration #

• Capital Markets: The Company has a reach across ~98% of India’s postal codes, with a network of external wealth managers in 550+ cities.
• Distribution Network: The Company has 8,010 external wealth managers.
• Housing Finance: 111 branches across 12 states/Union Territories.

Operational Efficiency Metrics #

• Housing Finance: Collection efficiency was 100.4%. GNPA and NNPA were 0.9% and 0.4%, respectively.
• Asset Management: Net yield (blended) stood at 73 bps in FY24.

Growth Initiatives and Challenges #

• Growth Initiatives:

  • Technological advancements: Upgraded trading platforms, implemented digital solutions (including the RISE Super App).
  • Product diversification: Launched new mutual funds and AIFs.
  • Expanded distribution capabilities: Engaged more external distribution partners.
  • Client education: Conducted webinars, increased engagement frequency.
  • Built Infrastructure: Launched Motilal Oswal Tower in Bangalore.
  • Advisory Capability: Trained relationship managers to increase customer wallet.
  • HFC Business: Ongoing efforts to bolster the sales force and enhance productivity
  • Strategic allocation of capital to long-term RoE enhancing opportunities.

• Challenges:

  • Market volatility.
  • Increased competition from local and global players.
  • Economic slowdown impacting investor sentiments and business activities.

Risk Assessment #

Strategic Risks #

Severity: High. The Indian economy’s projected growth and increasing equity market participation present significant opportunities, but intense competition from local and global financial service providers represents a substantial threat.

Likelihood: High. Competition in the Indian financial services market is demonstrably increasing, as evidenced by the growth in demat accounts and activity in IPOs, QIPs, and block deals.

Trend: Increasing. The financial services sector’s share of disposable income is growing, making the market more attractive and thus more competitive.

Mitigation Strategies: Diversification of business into liner sources of earnings (Asset and Wealth Management, Housing Finance), investment in technology (RISE Super App), expansion of distribution capabilities, and strategic allocation of capital to long-term RoE enhancing opportunities.

Control Effectiveness: Partially Effective. The Company shows resilience across business verticals, with notable growth in AUM and client base. However, competition remains a significant factor that will determine the long term and consistent efficiency of risk controls.

Potential Financial Impact: Significant. Failure to adapt to market changes and competition could result in loss of market share and reduced profitability, as evidenced by the fluctuations in operating margins.

Operational Risks #

Severity: Moderate to High. The reliance on technology and digital platforms, particularly in the capital markets segment, exposes the Company to operational disruptions, and systems failure.

Likelihood: Moderate. The operational infrastructure is robust, but technological dependence inherently increases risk probability.

Trend: Stable. The Company is investing in technology upgrades and digital solutions to improve efficiency and client experience.

Mitigation Strategies: Investment in technology upgrades, implementation of digital solutions, and a robust risk management framework including a Business Continuity & Disaster Recovery Policy.

Control Effectiveness: Moderate. While investments are being made, the inherent risk in technology-dependent operations remains.

Potential Financial Impact: Moderate to High. Operational disruptions can lead to direct financial losses, reputational damage, and client attrition.

Financial Risks #

Severity: Moderate. Market volatility directly impacts the Company’s treasury book, which is 100% invested in equity and equity products.

Likelihood: High. Market volatility is inherent in the equity markets. The reported Profit After Tax (PAT) is volatile due to marked-to-market gains or losses.

Trend: Fluctuating. The Company’s treasury investments have delivered an 18.3% XIRR, but significant fluctuations exist.

Mitigation Strategies: Diversified business model (Capital Markets, Asset & Private Wealth Management, Housing Finance), reinvestment of operating profits in treasury, and use of the treasury book as collateral for core business.

Control Effectiveness: Partially Effective. The Company’s business model and reinvestment strategy have historically yielded a robustly compounded net worth, showing some resilience, but exposure to market volatility remains.

Potential Financial Impact: High. Significant market downturns can substantially impact the value of the treasury book, affecting net worth and potentially requiring additional capital infusion.

Compliance/Regulatory Risks #

Severity: Moderate. The financial services industry is highly regulated, with continuous changes.

Likelihood: Moderate. The company is a Qualified Stock Broker (QSB) and must meet increased disclosure requirements.

Trend: Increasing. Regulatory scrutiny and reporting requirements in the financial services sector are increasing in India.

Mitigation Strategies: Enhanced compliance and risk management frameworks, dedicated Risk Management Committee, implementation of policies for insider trading, prevention of sexual harassment, whistleblower protection, and CSR.

Control Effectiveness: High. The company maintains a robust supervisory board, a dedicated Risk Management Committee, and comprehensive policies. The Company demonstrates compliance with applicable Secretarial Standards, Listing Regulations, and Code of Conduct. No instances of non-compliance were identified in the last financial year.

Potential Financial Impact: Moderate. Non-compliance can lead to penalties, sanctions, and reputational damage.

Emerging Risks #

Severity: High. The Company reported the delay in submitting the intimation to BSE Limited with respect to repayment/redemption of listed Commercial Papers. BSE levied a penalty which was paid by the Company.

Likelihood: Moderate.

Trend: Increasing.

Mitigation Strategies: Enhanced compliance and risk management frameworks.

Control Effectiveness: Moderate.

Potential Financial Impact: High. Non-compliance can lead to material financial losses, revocation of the SEBI registration, criminal charges, and reputational damage.

Strategic Analysis of Motilal Oswal Financial Services (MOFSL) #

Long-Term Strategic Goals and Progress #

• Capital Markets: Sustainable growth in RoE, diversifying revenue towards more predictable sources. Achieved all-time high quarterly and yearly profit with significant client growth, DP AUM of ₹1.46 Lakh Crore, and growing financial product distribution AUM.
• Asset & Private Wealth Management: Capitalize on the structural growth of the Indian economy by offering specialized products. AUM reached ₹1.95 Lakh Crore, performance turnaround in active mutual fund schemes, and launch of new funds.
• Housing Finance: Linear growth in AUM and enhancements in profitability, RoA, and RoE. Disbursements crossed ₹1,000 Crore, the loan book grew by 6% YoY, and maintained robust collection efficiency.
• Treasury Investment: Strategic allocation of capital to long-term RoE-enhancing opportunities including strategic allocation of capital to Motilal Oswal Home Finance Limited, and sponsor commitments to mutual fund and private equity funds.

Competitive Advantages and Market Positioning #

• Capital Markets: Niche and premium position, leveraging strong brand, extensive distribution network (98% of Indian pin codes), and research capabilities (250+ companies across 20+ sectors). Top rankings in Corporate Access and Execution.
• Asset & Private Wealth Management: Competitive edge through QGLP investment philosophy, diversified passive product portfolio, and high share of alternate assets (32% of AUM). Building an Ultra HNI offering in private wealth.
• Housing Finance: Focuses on the affordable housing segment, where competition is relatively low due to the customer profile and operation-intensive nature. Benefits from support from the parent, MOFSL, with a low net debt/equity ratio of 2x.

Innovation Initiatives and R&D Effectiveness #

• Capital Markets: Technological advancements are a key focus, including upgraded trading platforms, analytical tools, and the launch of the Super App RISE.
• Asset & Private wealth Management: Elevated Mr. Prateek Agrawal to Managing Director and Chief Executive Officer of Motilal Oswal AMC.
• Across all segments: Continued investment in robust risk mitigation to protect the Company against market volatility.

M&A Strategy and Execution #

• Capital Markets: Strategic acquisitions of small regional brokers transformed into external wealth managers and expanding their footprint.

Management’s Track Record in Execution #

• Overall: MOFSL reported its highest-ever total revenue (₹7,131 crore) and PAT (₹2,626 crore) in FY 2023-24, with a consolidated RoE of 35%. Strong growth was achieved across all verticals.
• Capital Markets: Secured new institutional clients and maintained engagement with over 850 institutions.
• Asset and Private Wealth Management: Asset Management AUM, encompassing mutual funds, portfolio management services and Alternate Investment Funds stood at H 71,810 Crore.
• Housing Finance: HFC reported a PAT of ₹ 132 Crore in FY 2023-24, with disbursements crossing ₹ 1,000 Crore.

Capital Allocation Strategy #

• Overall: MOFSL follows a “double-engine” business model. Free cash flows from operating businesses are reinvested in a treasury book, which is 100% invested in equity and equity products. Over the last 10 years, operating profits compounded at 34%.
• Treasury Investments: Strategic allocation to long-term RoE-enhancing opportunities like Motilal Oswal Home Finance Limited and commitments to mutual and private equity funds. Quoted equity investments stood at ₹4,206 crore, with a since-inception XIRR of 18.3%.
• Dividend: Declared and paid an Interim Dividend of ₹ 14/- per Equity Share

Organizational Changes and Their Impact #

• Asset & Private Wealth Management: Strengthened leadership with senior management hiring for Ultra HNI offerings and added 177 relationship managers, increasing total to 584.
• Housing Finance: Collaborations with U.S International Development Finance Corporation(DFC) in FY 2021-22 and received a commitment of USD 50 Million and the fourth and final tranches were disbursed during the year under review.
• Overall: Completed the first close of their sixth Real Estate Fund and launched IREF VI.

Future Projections and Guidance #

Capital Markets Segment #

Management Guidance and Assumptions #

• Achieved record quarterly and yearly profits.
• Maintained market shares of 8.2% and 8.7% in the Cash and F&O Premium segments, respectively.
• Focuses on diversifying business into more predictable earnings.

Market Growth Forecasts #

• The Indian capital market experienced a surge, with 3.7 crore new demat accounts in FY 2023-24.
• 32% YoY growth, reaching 15.14 crore accounts.
• Equity fundraising saw a 142% increase from FY23, totaling H 1.86 lakh crore.

Planned Strategic Initiatives #

• Prioritizing customer experience through digital initiatives and dedicated advisory desks.
• Launch of the ‘RISE’ Super App to centralize financial services.
• Strategic acquisitions of small regional brokers.

Efficiency Improvement Targets #

• Focus on Research and Advisory.
• Dedicated advisory desks.
• Super App.
• Upgraded trading platforms.

Potential Challenges and Opportunities #

• Increased competition from local and global players.
• Execution risk.
• Market trends favoring other asset classes are challenges.
• Opportunities include leveraging technology, capitalizing on corporate consolidation/acquisitions, and regulatory reforms.

Scenario Analysis #

• Bull Case: Continued Capital market boom.
• Bear Case: A short-term economic slowdown could impact investor sentiments and business activities, reducing trading volumes and fees.

Asset & Private Wealth Management Segment #

Management Guidance and Assumptions #

• AUM reached H 1.95 Lakh Crore.
• Notable improvements in the performance and inflows of the Asset Management arm.
• Private Wealth Management division is focusing on scalability with a strengthened leadership team and investments in Relationship Managers.

Market Growth Forecasts #

• The mutual fund industry’s AUM reached H 53.4 Lakh Crore (35% YoY growth).
• Equity mutual funds were H 29.2 Lakh Crore (51% YoY growth).
• SIP registrations surged to 4.2 Crore in FY 2023-24.
• India’s UHNI population is projected to grow at an 8% CAGR over 2023-2028.
• Professionally managed wealth in India is only 15-20% of total wealth, indicating significant growth potential.

Planned Strategic Initiatives #

• MOAMC launched seven mutual fund schemes, including a Small Cap Fund.
• Launch of IREF VI with H 2,000 crore fund size.

Efficiency Improvement Targets #

• Focus on increasing the share of performance-linked AUM in PMS and AIF to potentially strengthen net yields.

Potential Challenges and Opportunities #

• Key opportunity lies in the under-penetration of professional wealth management services in India.
• Shifting investor preference from traditional banking products and real estate to mutual funds represents a significant opportunity for growth.

Scenario Analysis #

• Bull Case: Increased household participation in equities and SIPs along with growth rate projected by McKinsey and Company.
• Bear Case: Change in Indian Household Asset Allocation.

Housing Finance Segment #

Management Guidance and Assumptions #

• Aim for linear growth in AUM.
• Enhancements in profitability, ROA, and ROE.
• Collaboration with U.S. International Development Finance Corporation (DFC).

Market Growth Forecasts #

• The Indian housing finance market is expected to grow at a CAGR of 24.1% from 2024 to 2033.
• Affordable housing segment loan book reached H 1,04,000 crore (26% YoY growth).
• Government schemes like PMAY are fueling demand.

Planned Strategic Initiatives #

• Bolstering its sales force and enhancing productivity to drive growth in disbursements and AUM.
• Focus on expanding branch network and leveraging channel partners.

Efficiency Improvement Targets #

• Targets for linear growth in AUM.
• Enhancements in profitability.

Potential Challenges and Opportunities #

• Opportunities: The lower competition in the affordable housing market, supported by government initiatives.
• Challenges: Rising interest rates may cause increase in cost of funds.

Scenario Analysis #

• Bull Case: Government initiatives such as the Urban Infrastructure Development Fund, Alternative Investment Fund, Pradhan Mantri Awas Yojana (Urban), Pradhan Mantri Awas Yojana (Gramin), and tax moderation.
• Bear Case: Any economic slowdown may cause customer to delay major purchase.

Treasury Investments Segment #

Management Guidance and Assumptions #

• Strategic allocation of capital to long-term RoE-enhancing opportunities, including MOHFL and sponsor commitments to mutual funds and private equity funds.
• Quoted equity investments at H 4,206 Crore and total investments at H 6,113 Crore as of March 31, 2024.

Market Growth Forecasts #

• Market trends will influence the performance of the treasury book, which is fully invested in equity.

Planned Strategic Initiatives #

• Reinvestment of core business surplus in the treasury book, with a long-term investment approach.

Efficiency Improvement Targets #

• Focus on extrapolated gains from treasury investments, leveraging the Company’s equity expertise.

Potential Challenges and Opportunities #

• Market volatility directly impacts the treasury book due to its 100% equity and equity product investment.

Scenario Analysis #

• Bull Case: Continued outperformance of the equity will have positive impact.
• Bear Case: Decline in India’s Equity market or any macro economic risk.

Sensitivity to Key Assumptions (Cross-Segmental) #

Interest Rate Changes #

• An increase in interest rates would increase borrowing costs for the Group.

Market Volatility #

• Given the Group’s significant exposure to capital markets and equity investments, significant market volatility will impact financial performance.

Regulatory Changes #

• Changes in regulations by SEBI, RBI or other regulatory bodies could introduce operational challenges, but could also create new opportunities.

Audit and Compliance Analysis #

Auditor’s Opinion and Qualifications #

• The Statutory Auditors, M/s. Singhi & Co., issued an unmodified opinion on the standalone and consolidated financial statements.
• One exception: Delay in submitting the intimation of one listed Commercial Paper as per Regulation 57(1) of SEBI regulations.
• Secretarial Audit Report and Annual Secretarial Compliance Report present no adverse remarks, qualifications, or reservations.
• The Statutory Auditors’ report had one “Emphasis of Matter” paragraph regarding the Scheme of Arrangement to restructure the business.
• The audit reports for the standalone financial statements and consolidated Financial statements of subsidiaries was done by various auditors.

Key Accounting Policies and Changes #

• The financial statements comply with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013.
• The financial statements are prepared on a historical cost basis, except for certain financial instruments, assets held for sale, and defined benefit plans, which are measured at fair value.
• Revenue recognition follows a five-step model as per Ind AS 115.
• No change in accounting policy during the FY 2023-24.
• The Company has applied a cumulative catch up approach to account for new leases, with the difference recognised in Retained Earnings.
• Accounting policies have been consistently applied with the exception of newly issued or revised accounting standards.
• Key estimates and judgments involve business model assessment, impairment provision, recognition of deferred tax assets, defined benefit plans, and share-based payments.

Internal Control Effectiveness #

• The Company has an adequate internal financial controls system with reference to Financial Statements and such Internal Financial Controls were operating effectively as of March 31, 2024.
• The Company’s internal control systems are deemed adequate and provide reasonable assurance of recording transactions, safeguarding assets, and preventing fraud.
• Risk assessment is reported to be performed through the Risk Management Enterprise Framework.
• No material or serious observations were received from auditors regarding inefficiency or inadequacy of controls for the FY 2023-24.
• For one accounting software, audit trail feature was enabled only for part of the year, but no instances of the feature being tampered with were found for any system.

Regulatory Compliance Status #

• Compliance with Corporate Governance requirements as per Regulation 17 to 27 and clause (b) to (i) of sub-regulation (2) of Regulation 46 of the Listing Regulations, and para (2) to (10) mentioned in part ‘C’ of Schedule V of the Listing Regulations.
• Compliance with Secretarial Standards SS-1 and SS-2.
• The Company is registered with SEBI and is a member of multiple stock exchanges.
• Compliance with Section 186 of the Act relating to loans, guarantees, and investments.
• No penalties or strictures were imposed by regulatory bodies (SEBI, stock exchanges) on capital market-related matters, except for the instance mentioned in the auditor’s opinion.
• The Business Responsibility & Sustainability Report (BRSR) indicates compliance with ESG-related regulations.
• The Company is not required to maintain cost records or undergo a cost audit under Section 148(1) of the Act.
• The Group implemented data protection measures in line with regulatory requirements.

Legal Proceedings and Their Potential Impact #

• The impact of pending litigations is disclosed in Note 38 of the standalone financial statements.
• Demands exist in respect of income tax matters for which appeals are pending. The Company believes these demands will likely be upheld in the appellate process.
• Claims against the company in civil cases amounted to H 646 lakhs.
• There are no proceedings pending under the Insolvency and Bankruptcy Code, 2016.

Related Party Transactions #

• All related party transactions during FY 2023-24 were on an arm’s length basis and in the ordinary course of business.
• The Company has a Board-approved policy on Materiality and Dealing with Related Party Transactions available at: https://www.motilaloswalgroup.com/Downloads/IR/235673531Policy-on-Materiality-and-Dealing-with-Related-Party-Transactions.pdf
• The Company obtained prior omnibus approval from the Audit Committee for unforeseen or repetitive transactions.
• Details of related party transactions are provided in Note 51 to the Standalone Financial Statements.
• The Company obtained approval of the Members of the Company for entering into material related party transaction(s) with MOHFL.

Subsequent Events #

• The Board has approved the issuance of Bonus Shares at a ratio of 3:1, subject to Members’ and regulatory approvals.
• The Board has approved the ‘Motilal Oswal Financial Services Limited - Employee Stock Option Scheme - X (ESOP Scheme - X)’ for grant of Employee Stock Options to eligible Employees.
• Change in designation of a Director and his designation as Key Managerial Personnel of the Company.

Accounting Quality and Regulatory Risk Assessment #

• Accounting Quality: Consistent application of accounting policies, compliance with Ind AS, and the use of external auditors suggest a high level of accounting quality. Detailed disclosures on key estimates and judgments also enhance transparency.
• Regulatory Risk: The Company appears to be in compliance with most regulations. The presence of a robust risk management framework and active engagement with regulators suggest a proactive approach to managing regulatory risk. However, pending legal and tax matters represent a potential, albeit low, regulatory risk. The Company’s registration with SEBI and membership of various exchanges add to a higher level of regulatory scrutiny.